Instamojo Aims for Profitability and Plans to Reapply for PA License

Instamojo Aims for Profitability and Plans to Reapply for PA License

Instamojo, backed by Mastercard, is targeting a return to profitability within the next 18 months after facing a setback when the Reserve Bank of India (RBI) rejected its payment aggregator (PA) license application last year. With the one-year waiting period for reapplication now expired, the company is considering resubmitting its request for the PA license.

Sampad Swain, co-founder and CEO of Instamojo, shared with Financial Express that the company aims to achieve ₹100 crore in revenue and ₹50 crore in profit after tax by FY26. He noted that Instamojo has successfully regained 60% of its revenue from before the PA license setback within a year.

The regulatory rejection significantly impacted Instamojo's operations, leading to a 70% drop in revenue during Q3 FY24. The company had initially been on track to report $1.5 million in profits for FY24 but had to reduce its workforce by around 20% in response to the downturn.

Prior to the regulatory issue, payments accounted for nearly 80% of Instamojo's revenue. Since then, the company has pivoted to a Digital Commerce as a Service (DCaaS) model, focusing on cross-selling its e-commerce services—such as setting up and managing online stores—to existing and former clients while expanding its sales and support teams.

In contrast to global players like Shopify, which successfully executed similar pivots with substantial funding and acquisitions, Instamojo has limited resources. With only $15 million in total funding, it lacks the financial capability for large-scale acquisitions that could enhance its market presence.

Shopify’s entry into the Indian market has been met with challenges as its higher pricing has led users to explore more affordable options like Meesho and Flipkart, which offer e-commerce solutions with in-house logistics. Other Indian startups in the e-commerce space are also facing profitability challenges; for instance, Dukaan reported ₹10 crore in revenue against a net loss of ₹35 crore for FY23, while DotPe posted a loss of ₹72 crore on revenues of ₹36.9 crore with over $90 million in funding.

Despite these industry challenges, Swain remains optimistic about Instamojo's prospects in the MSME sector. He stated that the company understands consumer needs and affordability during different growth stages. Leveraging its decade-long experience with MSMEs and a cost-effective customer acquisition strategy, Instamojo aims to facilitate its recovery and drive long-term growth.